That's a simplistic way of putting it.
More than just separating instruments, stereo provides a soundstage. When you close your eyes, you should be able to point to where the instrument is and how far it is from you. The little nuances like reverb and delays tells your brain where each sound is coming from, which provides for a more natural and enveloping sound experience.
Listening in mono is one of the most unnatural way to appreciate music. If you ever watched a live concert, you'd see the instrumentalists scattered on the stage and the sound from each of the individual instruments they play comes from where their amps are typically located. You don't see instrumentalists piled up on top of each other, do you? ;)





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